Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of staffing services provider Kforce
So what: Initially, Kforce seemed like it had an impressive quarter, beating estimates by $0.02 with a $0.24 EPS and posting decent top-line growth of 10.5%, but the company's goodwill impairment charge of $65 million, about 16% of its market value, seemed to catch up with it later in the day. While Kforce had announced the impairment charge the week before, the market had never really accounted for it by sending the stock lower. Third-quarter guidance was also nearly identical to the second quarter's results, but still below analyst estimates.
Now what: With $70 million in goodwill left on its balance sheet, investors have to be wondering how much of that might also be worthless. That aside, I still don't see any compelling reason to invest in Kforce. It operates in a highly competitive industry with virtually no barriers to entry, which helps explain its paper-thin margins, and it's not growing fast enough to offer investors superior returns in the future. It's no surprise that its shares have bounced around aimlessly over the past 10 years. If you're a believer, I'm sure there are worse places you can put your money, but if you hear any more about impairments, I'd say it's time to run.
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Fool contributor Jeremy Bowman holds no positions in this company. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.
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